0001815903--12-312021Q1050097982619707655true427584P60DP60DP60DP60DP12MP90DP6MP7Dus-gaap:OtherAssetsNoncurrentus-gaap:OtherLiabilitiesCurrentus-gaap:OtherLiabilitiesfalse0001815903us-gaap:CommonStockMember2021-01-262021-01-260001815903us-gaap:PreferredStockMember2021-01-012021-03-310001815903us-gaap:CommonStockMember2021-01-012021-03-310001815903us-gaap:RetainedEarningsMember2021-03-310001815903us-gaap:AdditionalPaidInCapitalMember2021-03-310001815903us-gaap:RetainedEarningsMember2020-12-310001815903us-gaap:AdditionalPaidInCapitalMember2020-12-310001815903us-gaap:RetainedEarningsMember2020-03-310001815903us-gaap:RetainedEarningsMember2019-12-310001815903us-gaap:CommonStockMember2021-03-310001815903us-gaap:PreferredStockMember2020-12-310001815903us-gaap:CommonStockMember2020-12-310001815903ptpi:PreferredUnitMember2020-03-310001815903ptpi:CommonUnitMember2020-03-310001815903ptpi:PreferredUnitMember2019-12-310001815903ptpi:CommonUnitMember2019-12-310001815903ptpi:JuggernautCapitalPartnersMemberptpi:StockPriceEqualsOrExceeds2.5375Memberptpi:BackstopAgreementMember2021-03-310001815903ptpi:JuggernautCapitalPartnersMemberptpi:StockPriceEqualsOrExceeds2.175Memberptpi:BackstopAgreementMember2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf8.00Member2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf18.75Member2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf16.25Member2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf15.00Member2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf13.00Member2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf12.50Member2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf10.00TwoMember2021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf10.00OneMember2021-03-3100018159032020-01-012020-12-310001815903us-gaap:SubsequentEventMember2021-04-232021-04-230001815903us-gaap:RestrictedStockUnitsRSUMemberus-gaap:SubsequentEventMember2021-04-082021-04-080001815903ptpi:NeurotropeIncMember2021-01-012021-03-310001815903us-gaap:ShareBasedPaymentArrangementNonemployeeMemberus-gaap:SubsequentEventMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2021-04-082021-04-080001815903us-gaap:ShareBasedPaymentArrangementEmployeeMember2021-02-192021-02-190001815903us-gaap:RestrictedStockUnitsRSUMemberus-gaap:SubsequentEventMember2021-04-232021-04-230001815903us-gaap:ShareBasedPaymentArrangementNonemployeeMemberus-gaap:SubsequentEventMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2021-04-082021-04-080001815903us-gaap:ShareBasedPaymentArrangementNonemployeeMemberus-gaap:SubsequentEventMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMember2021-04-082021-04-080001815903ptpi:MitsubishiTanabePharmaCorporationMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:MitsubishiTanabePharmaCorporationMemberptpi:LicenseAgreementMember2020-01-012020-03-310001815903us-gaap:NonUsMember2021-01-012021-03-310001815903country:US2021-01-012021-03-310001815903us-gaap:NonUsMember2020-01-012020-03-310001815903country:US2020-01-012020-03-310001815903ptpi:NeurotropeIncMemberus-gaap:PreferredStockMember2021-03-310001815903us-gaap:OperatingSegmentsMember2021-01-012021-03-310001815903us-gaap:RetainedEarningsMember2021-01-012021-03-310001815903us-gaap:RetainedEarningsMember2020-01-012020-03-310001815903ptpi:NeurotropeIncMember2021-03-310001815903ptpi:MetuchenSecurityholdersMember2021-03-310001815903ptpi:MetuchenPharmaceuticalsLlcMember2021-03-310001815903ptpi:IehBiopharmaLlcMemberptpi:VivusIncMember2020-07-070001815903srt:MinimumMember2021-03-310001815903srt:MaximumMember2021-03-310001815903us-gaap:CorporateNonSegmentMember2020-01-012020-03-310001815903ptpi:TimmMedicalProductMember2021-01-012021-03-310001815903ptpi:StendraProductMember2021-01-012021-03-310001815903ptpi:PtvProductMember2021-01-012021-03-310001815903ptpi:TimmMedicalProductMember2021-03-310001815903ptpi:StendraProductMember2021-03-310001815903ptpi:PtvProductMember2021-03-310001815903ptpi:TimmMedicalProductMember2020-12-310001815903ptpi:StendraProductMember2020-12-310001815903ptpi:PtvProductMember2020-12-310001815903us-gaap:SeniorDebtObligationsMember2020-09-300001815903us-gaap:SeniorDebtObligationsMember2020-04-130001815903us-gaap:SeniorDebtObligationsMember2020-03-310001815903ptpi:FirstSubordinatedPromissoryNoteMember2020-12-310001815903us-gaap:SeniorDebtObligationsMemberus-gaap:PrimeRateMember2020-04-132020-04-130001815903us-gaap:SeniorDebtObligationsMemberus-gaap:PrimeRateMember2020-03-312020-03-310001815903ptpi:PrescriptionMedicationSalesMember2021-01-012021-03-310001815903ptpi:PrescriptionMedicationSalesMember2020-01-012020-03-310001815903ptpi:MedicalDeviceSalesMember2020-01-012020-03-310001815903us-gaap:PreferredStockMember2021-01-262021-01-260001815903us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-03-310001815903us-gaap:AccountsReceivableMemberus-gaap:CreditConcentrationRiskMember2021-01-012021-03-310001815903us-gaap:AccountsReceivableMemberus-gaap:CreditConcentrationRiskMember2020-01-012020-12-310001815903us-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2020-01-012020-03-310001815903ptpi:ClassBUnitsMember2019-09-160001815903ptpi:ClassCommonUnitsMember2019-09-160001815903ptpi:NeurotropeIncMemberus-gaap:CommonStockMember2021-03-310001815903ptpi:MetuchenPharmaceuticalsLlcMemberus-gaap:CommonStockMember2021-03-310001815903ptpi:ExpirationDateOfSeptember162024Member2021-03-310001815903ptpi:ExpirationDateOfSeptember12025Member2021-03-310001815903ptpi:ExpirationDateOfSeptember12024Member2021-03-310001815903ptpi:ExpirationDateOfNovember172021TwoMember2021-03-310001815903ptpi:ExpirationDateOfNovember172021OneMember2021-03-310001815903ptpi:ExpirationDateOfMarch22025Member2021-03-310001815903ptpi:ExpirationDateOfJune52024Member2021-03-310001815903ptpi:ExpirationDateOfJune192024Member2021-03-310001815903ptpi:ExpirationDateOfJune172024Member2021-03-310001815903ptpi:ExpirationDateOfJune12025Member2021-03-310001815903ptpi:ExpirationDateOfJune12024Member2021-03-310001815903ptpi:ExpirationDateOfDecember12025TwoMember2021-03-310001815903ptpi:ExpirationDateOfDecember12025ThreeMember2021-03-310001815903ptpi:ExpirationDateOfDecember12025OneMember2021-03-310001815903ptpi:ExpirationDateOfDecember12025FourMember2021-03-310001815903ptpi:ExpirationDateOfDecember12025FiveMember2021-03-310001815903ptpi:ExpirationDateOfDecember12024Member2021-03-310001815903ptpi:ExpirationDateOfAugust232023Member2021-03-3100018159032020-03-3100018159032019-12-310001815903ptpi:MedicalDeviceSalesMember2021-03-310001815903ptpi:MedicalDeviceSalesMember2020-12-310001815903us-gaap:WarrantMember2021-01-012021-03-310001815903us-gaap:EmployeeStockOptionMember2021-01-012021-03-310001815903us-gaap:WarrantMember2020-01-012020-03-310001815903us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001815903ptpi:NeurotropeIncMemberus-gaap:CommonStockMember2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMembersrt:MaximumMemberptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMembersrt:MaximumMemberptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf8.00Member2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf18.75Member2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf16.25Member2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf15.00Member2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf13.00Member2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf12.50Member2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf10.00TwoMember2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPricePerShareOf10.00OneMember2021-01-012021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MetuchenPharmaceuticalsLlcMember2020-01-012020-12-310001815903us-gaap:ShareBasedPaymentArrangementNonemployeeMemberus-gaap:SubsequentEventMember2021-04-082021-04-080001815903ptpi:MitsubishiTanabePharmaCorporationMemberptpi:LicenseAgreementMember2021-03-310001815903ptpi:MitsubishiTanabePharmaCorporationMemberptpi:LicenseAgreementMember2020-12-310001815903us-gaap:SeniorDebtObligationsMember2020-09-302020-09-300001815903srt:MaximumMemberptpi:Dr.CharlesRyanMemberptpi:EmployeeLeaseAgreementMember2021-01-012021-03-310001815903ptpi:Mr.KeithLavanMemberptpi:SeparationAgreementMember2021-01-012021-03-310001815903ptpi:NeurotropeIncMemberus-gaap:PreferredStockMember2021-01-012021-03-310001815903ptpi:NeurotropeIncMemberus-gaap:CommonStockMember2021-01-012021-03-310001815903ptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo500000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo400000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo300000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo250000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPriceAnyTimeWithinTwelveMonthPeriodFollowingOneYearAnniversaryOfClosingMember2021-01-012021-03-310001815903ptpi:MilestoneEarnoutPaymentsMemberptpi:ClosingPriceAnyTimePriorToOneYearAnniversaryOfClosingMember2021-01-012021-03-310001815903ptpi:JuggernautCapitalPartnersMemberptpi:BackstopAgreementMember2021-01-012021-03-310001815903us-gaap:MemberUnitsMember2019-08-262019-08-260001815903ptpi:CorprominenceLlcMemberptpi:MarketingAndConsultingAgreementMember2021-01-012021-01-010001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo500000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo400000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo300000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-03-310001815903ptpi:MarketCapitalizationOrGrossProceedsEarnoutPaymentsMemberptpi:MarketCapitalizationIsGreaterThanOrEqualTo250000000Memberptpi:MetuchenPharmaceuticalsLlcMember2021-03-3100018159032020-01-012020-03-310001815903ptpi:MetuchenPharmaceuticalsLlcMemberus-gaap:CommonStockMember2021-01-012021-03-310001815903ptpi:InternationalCustomersMembersrt:MaximumMemberptpi:MedicalDeviceSalesMember2021-01-012021-03-310001815903ptpi:DomesticCustomersMembersrt:MinimumMemberptpi:MedicalDeviceSalesMember2021-01-012021-03-310001815903ptpi:FirstSubordinatedPromissoryNoteMember2021-01-012021-03-310001815903us-gaap:SeniorDebtObligationsMember2016-09-302016-09-300001815903us-gaap:SeniorDebtObligationsMember2021-02-012021-02-010001815903us-gaap:SeniorDebtObligationsMember2020-10-012020-10-010001815903us-gaap:SeniorDebtObligationsMember2017-11-220001815903us-gaap:SeniorDebtObligationsMember2016-09-300001815903ptpi:PrescriptionMedicationSalesMember2021-03-310001815903ptpi:PrescriptionMedicationSalesMember2020-12-310001815903srt:MinimumMemberptpi:PrescriptionMedicationSalesMember2021-01-012021-03-310001815903srt:MaximumMemberptpi:PrescriptionMedicationSalesMember2021-01-012021-03-310001815903ptpi:MedicalDeviceSalesMember2021-01-012021-03-310001815903ptpi:JuggernautCapitalPartnersMemberptpi:BackstopAgreementMember2021-03-310001815903ptpi:VivusIncMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:ScenarioSixMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:ScenarioOneMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:ScenarioFiveMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:VivusIncMemberptpi:ScenarioThreeMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:VivusIncMemberptpi:ScenarioFourMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:MitsubishiTanabePharmaCorporationMemberptpi:ScenarioTwoMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:MitsubishiTanabePharmaCorporationMemberptpi:ScenarioOneMemberptpi:LicenseAgreementMember2021-01-012021-03-310001815903ptpi:HybridMembersrt:MinimumMemberptpi:ExclusiveLicenseToH100Member2020-03-012020-03-310001815903ptpi:HybridMembersrt:MaximumMemberptpi:ExclusiveLicenseToH100Member2020-03-012020-03-310001815903ptpi:HybridMemberptpi:ExclusiveLicenseToH100Member2020-03-310001815903ptpi:HybridMemberptpi:ExclusiveLicenseToH100Member2020-12-012020-12-310001815903ptpi:HybridMemberptpi:ExclusiveLicenseToH100Member2020-10-012020-10-310001815903ptpi:HybridMemberptpi:ExclusiveLicenseToH100Member2020-01-012020-12-310001815903ptpi:ScenarioSixMemberptpi:LicenseAgreementMember2021-03-310001815903ptpi:ScenarioFiveMemberptpi:LicenseAgreementMember2021-03-310001815903ptpi:HybridMemberptpi:ExclusiveLicenseToH100Member2021-03-312021-03-310001815903ptpi:HybridMemberptpi:ExclusiveLicenseToH100Member2020-09-242020-09-240001815903ptpi:HybridMemberptpi:ExclusiveLicenseToH100Member2020-03-012020-03-310001815903ptpi:VivusIncMemberptpi:LicenseAgreementMember2016-09-302016-09-300001815903ptpi:VivusIncMemberus-gaap:OtherNoncurrentAssetsMemberptpi:LicenseAgreementMember2021-03-310001815903ptpi:VivusIncMemberus-gaap:OtherNoncurrentAssetsMemberptpi:LicenseAgreementMember2020-12-310001815903ptpi:VivusIncMemberus-gaap:OtherCurrentAssetsMemberptpi:LicenseAgreementMember2021-03-310001815903ptpi:VivusIncMemberus-gaap:OtherCurrentAssetsMemberptpi:LicenseAgreementMember2020-12-310001815903ptpi:VivusIncMemberptpi:LicenseAgreementMember2021-03-310001815903ptpi:VivusIncMemberptpi:LicenseAgreementMember2020-12-310001815903us-gaap:CorporateNonSegmentMember2021-01-012021-03-3100018159032020-12-070001815903ptpi:EmployeeLeaseAgreementMember2021-01-012021-03-310001815903ptpi:TaniaKingMemberptpi:ConsultingAndAdvisoryAgreementMember2021-04-012021-04-0100018159032021-03-3100018159032020-12-3100018159032021-05-1000018159032021-01-012021-03-31xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesptpi:Dptpi:directorptpi:segment

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2021

Or

    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                      to                   

Commission File Number: 001-39752

Petros Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware

85-1410058

(State of Incorporation)

(I. R. S. Employer Identification No.)

1185 Avenue of the Americas, 3rd Floor, New York, New York

10036

(Address of principal executive offices)

(Zip Code)

(973) 242-0005

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common stock, par value $0.0001

PTPI

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of May 10, 2021, there were 9,798,261 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q may contain or incorporate by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are based upon management’s assumptions, expectations, projections, intentions and beliefs about future events. Except for historical information, the use of predictive, future-tense or forward-looking words such as “intend,” “plan,” “predict,” “may,” “will,” “project,” “target,” “strategy,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “forecast,” “should” and similar expressions, whether in the negative or affirmative, that reflect our current views with respect to future events and operational, economic and financial performance are intended to identify such forward-looking statements. Such forward-looking statements are only predictions, and actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of risks and uncertainties, including, without limitation, Petros’ ability to execute on its business strategy, including its plans to develop and commercialize its product candidates; Petros’ ability to comply with obligations as a public reporting company; the ability of Petros to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002; the risk that the financial performance of Petros may not be as anticipated by the merger transactions that resulted in the Company’s creation; risks resulting from Petros’ status as an emerging growth company, including that reduced disclosure requirements may make shares of Petros common stock less attractive to investors; risks related to Petros’ history of incurring significant losses; risks related to Petros’ substantial dependence on the commercialization of a single product, Stendra®, and on a single distributor thereof; risks related to Petros’ commercial supply agreement with Vivus, including the risk that Petros may not be able to obtain sufficient quantities of Stendra® in a timely manner or on commercially viable terms; risks related to Petros’ ability to obtain regulatory approvals for, or market acceptance of, any of its products or product candidates; and the expected or potential impact of the novel coronavirus (“COVID-19”) pandemic, and the related responses of governments, consumers, customers, suppliers, employees and the Company, on our business, operations, employees, financial condition and results of operations. Additional factors that could cause actual results to differ materially from the results anticipated in these forward-looking statements are described in this Quarterly Report on Form 10-Q, in “Risk Factor Summary” and in Part I, Item 1A., “Risk Factors,” in Petros’ Annual Report on Form 10-K for the year ended December 31, 2020 and in our other reports that we file with the Securities and Exchange Commission (the “SEC”). We advise you to carefully review the reports and documents we file from time to time with the SEC, particularly our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. Petros cautions readers that the forward-looking statements included in, or incorporated by reference into, this Quarterly Report on Form 10-Q represent our beliefs, expectations, estimates and assumptions only as of the date hereof and are not intended to give any assurance as to future results. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, Petros cannot assess the effect of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in, or incorporated by reference into, this Quarterly Report on Form 10-Q to reflect any new information or future events or circumstances or otherwise, except as required by the federal securities laws.

OTHER INFORMATION

All references to “Petros,” the “Company,” “we,” “us” and “our” in this Quarterly Report on Form 10-Q refer to Petros Pharmaceuticals, Inc. and its subsidiaries.

Table of Contents

TABLE OF CONTENTS

    

Page

PART I—FINANCIAL INFORMATION

4

Item 1. Financial Statements (unaudited).

4

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

4

Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020

5

Condensed Consolidated Statements of Changes in Stockholders’ Equity/Members’ Capital for the three months ended March 31, 2021 and 2020

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

7

Notes to Condensed Consolidated Financial Statements

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

30

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

45

Item 4. Controls and Procedures.

45

PART II—OTHER INFORMATION

46

Item 1. Legal Proceedings.

46

Item 1A. Risk Factors.

46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

46

Item 3. Defaults Upon Senior Securities.

46

Item 4. Mine Safety Disclosures.

46

Item 5. Other Information.

46

Item 6. Exhibits.

47

Signatures.

48

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PETROS PHARMACEUTICALS, INC.

(formerly Metuchen Pharmaceuticals, LLC)

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 

    

2021

December 31, 

    

(Unaudited)

    

2020

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash

$

14,566,710

$

17,139,694

Accounts receivable, net

 

6,194,198

 

5,152,969

Inventories

 

560,864

 

760,530

Deposits with related party

 

4,576

 

4,576

Prepaid expenses and other current assets

 

2,637,316

 

2,847,284

Total current assets

 

23,963,664

 

25,905,053

Fixed assets, net

 

57,062

 

64,250

Intangible assets, net

 

30,434,646

 

32,160,919

API purchase commitment

 

11,144,257

 

11,144,257

Other assets

 

554,379

 

579,535

Total assets

$

66,154,008

$

69,854,014

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Current portion of senior debt, net

$

5,061,264

$

7,175,029

Accounts payable

 

5,276,283

 

5,609,556

Accrued expenses

 

15,382,284

 

14,683,786

Accrued inventory purchases

 

14,203,905

 

14,203,905

Other current liabilities

 

296,620

 

221,766

Total current liabilities

 

40,220,356

 

41,894,042

Derivative liability

 

4,510,000

 

9,890,000

Other long-term liabilities

 

500,512

 

600,920

Total liabilities

 

45,230,868

 

52,384,962

Stockholders’ Equity:

 

  

 

  

Preferred stock (par value of $0.0001 per share, 50,000,000 shares authorized, 0 and 500 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively)

 

 

Common stock (par value of $0.0001 per share, 150,000,000 shares authorized, 9,798,261 and 9,707,655 shares issued and outstanding as of March 31, 2021, and December 31, 2020, respectively)

 

980

 

971

Additional paid-in capital

 

79,615,223

 

79,170,225

Accumulated deficit

 

(58,693,063)

 

(61,702,144)

Total Stockholders’ Equity

 

20,923,140

 

17,469,052

Total Liabilities and Stockholders' Equity

$

66,154,008

$

69,854,014

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

4

Table of Contents

PETROS PHARMACEUTICALS, INC.

(formerly Metuchen Pharmaceuticals, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended

March 31, 

    

2021

    

2020

Net sales

$

4,075,606

$

1,791,921

Cost of goods sold

 

643,386

 

784,035

Gross profit

 

3,432,220

 

1,007,886

Operating expenses:

 

  

 

  

Selling, general and administrative

 

3,881,717

 

4,816,463

Research and development expense

 

19,181

 

139,385

Depreciation and amortization expense

 

1,728,829

 

1,661,362

Total operating expenses

 

5,629,727

 

6,617,210

Loss from operations

 

(2,197,507)

 

(5,609,324)

Change in fair value of derivative liability

 

5,380,000

 

Interest expense, senior debt

 

(173,412)

 

(427,584)

Interest expense, subordinated related party term loans

 

 

(76,282)

Income (loss) before income taxes

 

3,009,081

 

(6,113,190)

Income tax benefit

 

 

(29,971)

Net income (loss)

$

3,009,081

$

(6,083,219)

Net income (loss) per common share

 

  

 

  

Basic and Diluted

$

0.31

$

(1.23)

Weighted average common shares outstanding

 

  

 

  

Basic

 

9,753,086

 

4,949,610

Effect of common share equivalents

 

1,600

 

Diluted

 

9,754,686

 

4,949,610

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

5

Table of Contents

PETROS PHARMACEUTICALS, INC.

(formerly Metuchen Pharmaceuticals, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY / MEMBERS’ CAPITAL

(Unaudited)

    

Preferred 

    

    

Common

    

    

Preferred 

Units 

Common

Units 

Accumulated 

    

Units

    

Amount

    

Units

    

Amount

    

Deficit

    

Total

Balance, December 31, 2019

 

1,619,754

$

20,018,205

 

3,434,551

$

29,117,233

 

$

(41,116,219)

$

8,019,219

Net loss

 

 

 

 

 

 

(6,083,219)

 

(6,083,219)

Balance, March 31, 2020

 

1,619,754

$

20,018,205

 

3,434,551

$

29,117,233

 

$

(47,199,438)

$

1,936,000

    

    

    

Common

    

    

    

Preferred 

Common 

Stock 

Paid-in 

Accumulated 

Stock

Stock

Amount

Capital

Deficit

Total

Balance, December 31, 2020

 

500

9,707,655

$

971

$

79,170,225

$

(61,702,144)

$

17,469,052

Conversion of Preferred Stock to Common Stock

 

(500)

60,606

 

6

 

(6)

 

 

Issuance of Common Stock for services

 

30,000

 

3

 

97,797

 

 

97,800

Stock-Based Compensation Expense

 

 

 

347,207

 

 

347,207

Net income

 

 

 

 

3,009,081

 

3,009,081

Balance, March 31, 2021

 

9,798,261

$

980

$

79,615,223

$

(58,693,063)

$

20,923,140

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

6

Table of Contents

PETROS PHARMACEUTICALS, INC.

(formerly Metuchen Pharmaceuticals, LLC)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

    

For the Three Months Ended March 31, 

2021

2020

Cash flows from operating activities:

 

  

 

  

Net income (loss)

$

3,009,081

$

(6,083,219)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

 

  

 

  

Depreciation and amortization

 

1,728,829

 

1,661,362

Bad debt expense

 

2,984

 

Inventory and sample inventory reserve

 

48,228

 

113,207

Non-cash paid-in-kind interest

 

 

116,299

Amortization of deferred financing costs and debt discount

 

12,500

 

Accretion for end of term fee

 

 

45,396

Deferred tax benefit

 

 

(29,971)

Lease expense

 

25,156

 

22,202

Derivative liability

 

(5,380,000)

 

Stock based compensation

 

347,207

 

Non-employee stock based compensation

97,800

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

(1,044,213)

 

(1,479,722)

Inventories

 

193,987

 

225,510

Deposits

 

 

2,326

Prepaid expenses and other current assets

 

172,051

 

1,309,356

Accounts payable

 

(333,273)

 

1,350,722

Accrued expenses

 

698,498

 

531,107

Accrued inventory purchases

 

 

(250,000)

Other current liabilities

 

74,992

 

115,167

Long-term liabilities

 

(100,408)

 

(25,009)

Net cash used in operating activities

 

(446,581)

 

(2,375,267)

Cash flows from investing activities:

 

  

 

  

Acquisition of fixed assets

 

 

(4,429)

Net cash used in investing activities

 

 

(4,429)

Cash flows from financing activities:

 

  

 

  

Payment of senior debt

 

(1,592,028)

 

(1,624,274)

Payment of portion of senior debt end of term fee

 

(534,375)

 

Proceeds from subordinated related party term loans

 

 

3,000,000

Net cash (used in) provided by financing activities

 

(2,126,403)

 

1,375,726

Net decrease in cash

 

(2,572,984)

 

(1,003,970)

Cash, beginning of period

 

17,139,694

 

2,145,815

Cash, end of period

 

14,566,710

 

1,141,845

Supplemental cash flow information:

 

  

 

  

Cash paid for interest during the period

$

176,677

$

372,060

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

7

Table of Contents

PETROS PHARMACEUTICALS, INC.

(formerly Metuchen Pharmaceuticals, Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1)    Nature of Operations, Basis of Presentation, and Liquidity

Nature of Operations

Petros Pharmaceuticals, Inc. (“Petros” or the “Company”) was organized as a Delaware corporation on May 14, 2020 for the purpose of effecting the transactions contemplated by that certain Agreement and Plan of Merger, dated as of May 17, 2020 (the “Original Merger Agreement”), by and between Petros, Neurotrope, Inc., a Nevada corporation (“Neurotrope”), PM Merger Sub 1, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Petros (“Merger Sub 1”), PN Merger Sub 2, Inc., a Delaware corporation and a wholly-owned subsidiary of Petros (“Merger Sub 2”), and Metuchen Pharmaceuticals LLC, a Delaware limited liability company (“Metuchen”). On July 23, 2020, the parties to the Merger Agreement entered into the First Amendment to the Agreement and Plan of Merger and Reorganization (the “First Merger Agreement Amendment”) and on September 30, 2020, the parties to the Original Merger Agreement entered into the Second Amendment to the Agreement and Plan of Merger and Reorganization (the “Second Merger Agreement Amendment” and, together with the Original Merger Agreement and the First Merger Agreement Amendment, the “Merger Agreement”). The Merger Agreement provided for (1) the merger of Merger Sub 1, with and into Metuchen, with Metuchen surviving as a wholly-owned subsidiary of Petros (the “Metuchen Merger”) and (2) the merger of Merger Sub 2 with and into Neurotrope, with Neurotrope surviving as a wholly-owned subsidiary of Petros (the “Neurotrope Merger” and together with the Metuchen Merger, the “Mergers”). As a result of the Mergers, Metuchen and Neurotrope became wholly-owned subsidiaries of Petros, and Petros became a publicly traded corporation on December 1, 2020. On December 7, 2020, Neurotrope completed the spin-off of certain assets, whereby (i) any cash in excess of $20,000,000, subject to adjustment as provided in the Merger Agreement, and all of the operating assets and liabilities of Neurotrope not retained by Neurotrope in connection with the Mergers were contributed to Synaptogenix, Inc. (formerly known as Neurotrope Bioscience, Inc.), a Delaware corporation (“Synaptogenix”), and a wholly-owned subsidiary of Neurotrope.

The Mergers were accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Metuchen was determined to be the accounting acquirer based on an analysis of the criteria outlined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) No. 805, Business Combinations (“ASC 805”) and the facts and circumstances specific to the Mergers, including: (1) Metuchen Securityholders owned approximately 51.0% of the equity securities of Petros immediately following the closing of the transaction; (2) a majority of the board of directors of Petros are composed of directors designated by Metuchen under the terms of the Mergers; and (3) a majority of the existing members of Metuchen’s management are the management of Petros. The net assets of Metuchen are stated at historical costs in the Company’s Condensed Consolidated Financial Statements, with no goodwill or intangible assets recorded. Accordingly, the historical financial statements of Metuchen through November 30, 2020 became the Company’s historical financial statements, including the comparative prior periods. These Condensed Consolidated Financial Statements include Metuchen, Petros and Neurotrope, Inc, after the spin-off discussed above, from December 1, 2020, the date the reverse recapitalization was consummated.

8

Table of Contents

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations and cash flows. The condensed consolidated balance sheet at December 31, 2020, has been derived from audited financial statements as of that date. The unaudited interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our Annual Report on Form 10-K for the year ended December 31, 2020. Certain prior year amounts have been reclassified for consistency with current year presentation. These reclassifications had no effect on the reported results of operations.

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of TIMM Medical, Inc. (“TIMM”), and Pos-T-Vac, LLC (“PTV”), subsidiaries of Metuchen, and Metuchen, a subsidiary of Petros. All intercompany accounts and transactions are eliminated in consolidation.

Liquidity

The Company has experienced net losses and negative cash flows from operations since its inception. As of March 31, 2021, the Company had cash of $14.6 million, negative working capital of approximately $16.3 million, including debt of $5.1 million maturing in 2021, and sustained cumulative losses attributable to common stockholders of $58.7 million. Our plans include, or may include, utilizing our cash and cash equivalents on hand, negotiating an extension of our debt arrangement and our liability due to Vivus as well as exploring additional ways to raise capital in addition to increasing cash flows from operations. While we are optimistic that we will be successful in our efforts to achieve our plan, there can be no assurances that we will be successful in doing so. As such, we obtained a continued support letter from our largest shareholder, JCP III SM AIV, L.P., (“the JCP Investor”) through May 17, 2022.

2)    Summary of Significant Accounting Policies

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and reported amounts of revenue and expenses during the reporting periods. Such estimates include the adequacy of accounts receivable reserves, return reserves, inventory reserves, and assessment of long-lived assets, including intangible asset impairment, the determination of the fair value of the derivative liability, and the allocation of the purchase price in acquisitions, among others. Actual results could differ from these estimates and changes in these estimates are recorded when known.

Risks and Uncertainties

The Company is subject to risks common to companies in the pharmaceutical industry including, but not limited to, uncertainties related to commercialization of competitor products, regulatory approvals, dependence on key products, dependence on key customers and suppliers, and protection of intellectual property rights.

9

Table of Contents

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. As a result of the COVID-19 pandemic, which continues to rapidly evolve, “shelter in place” orders and other public health guidance measures were implemented across much of the United States, Europe and Asia, including in the locations of the Company’s offices, key vendors and partners. The pandemic has significantly impacted the economic conditions in the U.S. and globally as federal, state and local governments react to the public health crisis, creating significant uncertainties in the economy. At this time, the future trajectory of the COVID-19 outbreak remains uncertain, both in the United States and in other markets. While the Company anticipates that currently available vaccines will be widely distributed in the future, the timing and efficacy of such vaccines are uncertain. The Company cannot reasonably estimate the length or severity of the impact that the COVID-19 outbreak will have on its financial results, and the Company may experience a material adverse impact on its sales, results of operations, and cash flows in fiscal 2021.

During 2020, government regulations and the voluntary business practices of the Company and prescribing physicians have prevented in-person visits by sales representatives to physicians’ offices. The Company has taken steps to mitigate the negative impact on its businesses of such restrictions. In March 2020, the Company reduced its sales representative head count to reflect the lack of in-person visits. The Company has maintained a core sales team which continues to contact physicians via telephone and videoconference as well as continuing to have webinars provided by the Company’s key opinion leaders to other physicians and pharmacists. The Company anticipates rehiring and/or assigning representatives to cover sales territories as physician access resumes new normal levels. In response to the spread of COVID-19, in March 2020, the Company closed its administrative offices and as of March 31, 2021, they remain closed, with the Company’s employees continuing their work outside of the Company’s offices. The Company has selectively resumed in-person interactions by its customer-facing personnel in compliance with local and state restrictions. The Company also continues to engage with customers virtually as the Company seeks to continue to support healthcare professionals and patient care. However, the Company’s ability to engage in personal interactions with physicians and customers remains limited, and it is unknown when the Company’s offices will reopen, and these interactions will be fully resumed.

Revenue Recognition

Prescription Medication Sales

The Company’s prescription medication sales consist of sales of Stendra® in the U.S. for the treatment of male erectile dysfunction. Under ASC Topic 606, Revenue Recognition (“Topic 606”), the Company recognizes revenue from prescription medication sales when its performance obligations with a customer has been satisfied. In the contracts with its customers, the Company has identified a single performance obligation to provide Stendra® upon receipt of a customer order. The performance obligation is satisfied at a point in time when the Company’s customers obtain control of Stendra®, which is typically upon delivery. The Company invoices its customers after Stendra® has been delivered and invoice payments are generally due within 30 to 75 days of invoice date.

In determining the transaction price, a significant financing component does not exist since the timing from when the Company delivers Stendra® to when the customers pay for the product is typically less than one year. The Company records prescription medication sales net of any variable consideration, including but not limited to discounts, rebates, returns, chargebacks, and distribution fees. The Company uses the expected value method when estimating its variable consideration, unless terms are specified within contracts. The identified variable consideration is recorded as a reduction of revenue at the time revenues from sales of Stendra® are recognized. The Company recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period. These estimates may differ from actual consideration received. The Company evaluates these estimates each reporting period to reflect known changes.

10

Table of Contents

As of March 31, 2021 and December 31, 2020, the reserves for sales deductions were $8.2 million and $8.6 million, respectively. The most significant sales deductions included in this reserve relate to returns, contract rebates, and distribution service (“DSA”) fees. Our estimates are based on factors such as our direct and indirect customers’ buying patterns and the estimated resulting contractual deduction rates, historical experience, specific known market events and estimated future trends, current contractual and statutory requirements, industry data, estimated customer inventory levels, current contract sales terms with our direct and indirect customers, and other competitive factors. Significant judgment and estimation is required in developing the foregoing and other relevant assumptions. The most significant sales deductions are further described below.

Product Returns

Consistent with industry practice, the Company maintains a return policy that generally allows its customers to return Stendra® and receive credit for product within six months prior to expiration date and up to one year after expiration date. The provision for returns is based upon the Company’s estimates for future Stendra® returns and historical experience. The provision of returns is part of the variable consideration recorded at the time revenue is recognized. As of March 31, 2021 and December 31, 2020, the reserves for product returns were $7.0 million and $7.1 million, respectively, and are included as a component of accrued expenses.

Contract Rebates, Coupon Redemptions and DSA Fees

The Company establishes contracts with wholesalers, chain stores, and indirect customers that provide for rebates, sales incentives, DSA fees and other allowances. Some customers receive rebates upon attaining established sales volumes. Direct rebates are generally rebates paid to direct purchasing customers based on a percentage applied to a direct customer’s purchases from us, including fees paid to wholesalers under our DSAs, as described below. Indirect rebates are rebates paid to indirect customers that have purchased our products from a wholesaler under a contract with us.

The Company has entered into DSAs with certain of our significant wholesaler customers that obligate the wholesalers, in exchange for fees paid by us, to: (i) manage the variability of their purchases and inventory levels within specified limits based on product demand and (ii) provide us with specific services, including the provision of periodic retail demand information and current inventory levels for our pharmaceutical products held at their warehouse locations.

Medical Device Sales

The Company’s medical device sales consist of domestic and international sales of men’s health products for the treatment of erectile dysfunction. The men’s health products do not require a prescription and include Vacuum Erection Devices, VenoSeal, and other related accessories. Under Topic 606, the Company recognizes revenue from medical device sales when its performance obligations with its customers have been satisfied. In the contracts with its customers, the Company has identified a single performance obligation to provide medical devices upon receipt of a customer order. The performance obligation is satisfied at a point in time when the Company’s customers obtain control of the medical device, which is typically upon shipment. The Company invoices its customers after the medical devices have been shipped and invoice payments are generally due within 30 days of invoice date for domestic customers and 90 days for international customers.

In determining the transaction price, a significant financing component does not exist since the timing from when the Company delivers the medical devices to when the customers pay for the product is typically less than one year. The Company records medical device sales net of any variable consideration, including but not limited to returns. The Company uses the expected value method when estimating its variable consideration. The identified variable consideration is recorded as a reduction of revenue at the time revenues from the medical device sales are recognized. The Company recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period. These estimates may differ from actual consideration received. The Company evaluates these estimates each reporting period to reflect known changes.

11

Table of Contents

Product Returns

Consistent with industry practice, the Company maintains a return policy that generally allows its customers to return medical devices and receive credit for products within 90 days of the sale. The provision for returns is based upon the Company’s estimates for future product returns and historical experience. The Company has not made significant changes to the judgments made in applying Topic 606. As of March 31, 2021 and December 31, 2020, the reserves for product returns for medical devices were not significant.

Contract Costs

In relation to customer contracts, the Company incurs costs to fulfill a contract but does not incur costs to obtain a contract. These costs to fulfill a contract do not meet the criteria for capitalization and are expensed as incurred. As such, the Company did not have any contract assets at March 31, 2021and December 31, 2020.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market.

Level 3 — Unobservable inputs which are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Financial instruments recognized at historical amounts in the condensed consolidated balance sheets consist of cash, accounts receivable, other current assets, accounts payable, accrued expenses, other current liabilities, and senior debt. The Company believes that the carrying value of cash, accounts receivable, other current assets, accounts payable, accrued expenses, and other current liabilities approximates their fair values due to the short-term nature of these instruments.

The carrying value of senior debt as of March 31, 2021 and December 31, 2020 approximated fair value. The fair value of the senior debt was estimated by discounting to present value the scheduled coupon payments and principal repayment, using an appropriate fair market yield and is considered Level 3 in the fair value hierarchy.

In connection with the Mergers in December 2020, each security holder of Metuchen received an earnout consideration classified as a derivative liability to be paid in the form of Petros Common Stock. The Company estimated their fair value using a Monte Carlo Simulation approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the derivative liability as March 31, 2021, and December 31, 2020 was $4.5 million and $9.9 million, respectively. See Note 10 Stockholders’ Equity.

12

Table of Contents

Stock-Based Compensation

The Company accounts for stock-based awards to employees and consultants in accordance with applicable accounting principles, which requires compensation expense related to stock-based transactions, including employee stock options and consultant warrants, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options or warrants. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. Employee stock option and consulting expenses are recognized over the employee’s or consultant’s requisite service period (generally the vesting period of the equity grant).

The Company’s option pricing model requires the input of highly subjective assumptions, including the volatility and expected term. Any changes in these highly subjective assumptions can significantly impact stock-based compensation expense. See Note 11 Stock Options.

Income Taxes

Prior to the consummation of the Mergers, Metuchen was a limited liability company (“LLC”) for federal income tax purposes and had elected to be treated as a Partnership for federal and state income tax purposes. PTV is a disregarded entity for federal income tax purposes. As such, all income tax consequences resulting from the operations were reported on the member’s income tax return. In addition, Timm was included in the Company’s structure where taxes were paid at the entity level.

Subsequent to the Mergers, Metuchen’s activity is included in the Company’s consolidated group. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize deferred tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with FASB ASC No. 740 Income Taxes (“ASC 740) on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying condensed consolidated statement of operations. As of March 31, 2021 and December 31, 2020 no accrued interest or penalties are recorded in the condensed consolidated balance sheets.

13

Table of Contents

Basic and Diluted Net Loss per Common Share

The Company computes basic net loss per common share by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period, excluding the dilutive effects of stock options and warrants to purchase common shares. The Company computes diluted net loss per common share by dividing the net loss applicable to common share by the sum of the weighted-average number of common shares outstanding during the period plus the potential dilutive effects of its convertible preferred stocks, stock options and warrants to purchase common shares, but such items are excluded if their effect is anti-dilutive. Because the impact of these items is anti-dilutive during periods of net loss, there was no difference between the Company’s basic and diluted net loss per share of common stock for the three months ended March 31, 2020. See Note 13 Basic and Diluted Net Loss per Common Share.

Recent Accounting Pronouncements

Pending Adoption as of March 31, 2021

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13, together with a series of subsequently issued related ASUs, has been codified in Topic 326. Topic 326 establishes new requirements for companies to estimate expected credit losses when measuring certain financial assets, including accounts receivables. The new guidance is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the effect that the new guidance will have on its condensed consolidated financial statements and related disclosures.

3)    Accounts Receivable, net

Accounts receivable, net is comprised of the following:

    

March 31, 2021

    

December 31, 2020

Gross accounts receivables

$

7,252,380

$

6,560,291

Distribution service fees

 

(658,386)

 

(972,652)

Chargebacks accrual

 

(96,848)

 

(121,269)

Cash discount allowances

 

(71,164)

 

(84,601)

Allowance for doubtful accounts

 

(231,784)

 

(228,800)

Total accounts receivable, net

$

6,194,198

$

5,152,969

For the three months ended March 31, 2021 and 2020, gross sales from customers representing 10% or more of the Company’s total gross sales included one customer which represented approximately 88% and 82% of total gross sales, respectively. Receivables from customers representing 10% or more of the Company’s gross accounts receivable included one customer at March 31, 2021 and December 31, 2020 equal to 93% for both periods, of the Company’s total gross accounts receivables.

4)    Inventories

Inventory is comprised of the following:

    

March 31, 2021

    

December 31, 2020

Raw materials

$

298,785

$

325,932

Finished goods

 

262,079

 

434,598

Total inventory

$

560,864

$

760,530

Finished goods are net of valuation reserves of $941,545 and $935,866 as of March 31, 2021 and December 31, 2020, respectively. Raw materials are net of valuation reserves of $2,872,977 as of both March 31, 2021 and December 31, 2020, respectively, which is related to bulk inventory that is fully reserved.

14

Table of Contents

5)    Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following:

    

March 31, 2021

    

December 31, 2020

Prepaid samples

$

5,645

$

58,483

Prepaid insurance

 

180,819

 

149,452

Prepaid FDA fees

 

504,648

 

756,972

Prepaid coupon fees

 

71,500

 

71,500

API purchase commitment asset (see Note 14)

 

1,304,541

 

1,304,541

Other prepaid expenses

 

473,080

 

391,552

Other current assets

 

97,083

 

114,784

Total prepaid expenses and other current assets

$

2,637,316

$

2,847,284

Prepaid samples, which are presented net of reserves, are expensed when distributed to the sales force. The prepaid samples reserve amount was $393,773 and $351,224 at March 31, 2021, and December 31, 2020, respectively.

6)    Intangible Assets

Balance at December 31, 2019

    

$

38,811,137

Amortization expense

 

(6,650,218)

Balance at December 31, 2020

$

32,160,919

Amortization expense

 

(1,726,273)

Balance at March 31, 2021

$

30,434,646

The future annual amortization related to the Company’s intangible assets is as follows:

2021 (remaining 9 months)

    

5,141,498

2022

 

6,191,740

2023

 

5,445,729

2024

 

4,650,787

Thereafter

 

9,004,892

Total

$

30,434,646

The intangible assets held by the Company are the Stendra® product, Timm Medical product, and PTV product and are being amortized over their estimated useful lives of 10 years, 12 years, and 12 years, respectively. The carrying value of the Stendra® product, Timm Medical product, and PTV product as of March 31, 2021 are $23.2 million, $5.6 million, and $1.6 million, respectively. The carrying value of the Stendra® product, Timm Medical product, and PTV product as of December 31, 2020 are $24.6 million, $5.9 million, and $1.6 million, respectively.

15

Table of Contents

7)    Accrued Expenses

Accrued expenses are comprised of the following:

    

March 31, 2021

    

December 31, 2020

Accrued price protection

$

1,853,979

$

1,853,979

Accrued product returns

 

9,350,000

 

9,452,248

Accrued contract rebates

 

415,043

 

412,046

Due to Vivus (see Note 14)

 

2,267,523

 

2,267,523

Due to third-party logistic provider

 

620,665

 

Accrued severance

 

186,679

 

519,609

Accrued professional fees

 

69,916

 

Other accrued expenses

 

618,479

 

178,381

Total accrued expenses

$

15,382,284

$

14,683,786

As part of its acquisition of Stendra®, the Company provides the previous owner with price protection for certain Stendra® product returns that are processed by the previous owner. Some customer agreements require that product returns be credited at the current wholesale acquisition cost (“WAC”). If the Company subsequently raises the WAC, the Company will reimburse the previous owner for the difference between the current WAC and the original sale price for returns processed by the previous owner.

8)    Debt

Senior Debt

The following is a summary of the Company’s senior indebtedness at March 31, 2021, and December 31, 2020:

    

March 31, 2021

    

December 31, 2020

Principal balance

$

5,061,264

$

6,653,292

Plus: End of term fee

 

 

534,237

Less: Debt issuance costs

 

 

(12,500)

Total senior debt

$

5,061,264

$

7,175,029

On September 30, 2016, the Company entered into a loan agreement with Hercules, a third party, for a $35 million term loan (“Senior Debt”). The Senior Debt includes an additional Paid-In-Kind (“PIK”) interest that increases the outstanding principal on a monthly basis at an annual rate of 1.35% and a $787,500 end of term charge. The end of term charge is being recognized as interest expense and accreted over the term of the Senior Debt using the effective interest method.

On November 22, 2017, the Company amended its loan agreement with Hercules (“First Amendment”). The end of term charge was increased from $787,500 to $1,068,750

On April 13, 2020, the Company amended its loan agreement with Hercules. The amendment waived all financial covenant defaults for all periods since inception through the period ending March 31, 2020. The amendment also included the following changes:

Extended the maturity date from October 1, 2020 to April 2021, which can be further extendable to December 1, 2021 upon achieving the Financing Milestone, as defined in the agreement.
Increased the cash interest rate from the greater of (a) 10.75% or (b) 10.75% plus the US WSJ Prime minus 4.50% to the greater of (a) 11.50% or (b) 11.50% plus the US WSJ Prime minus 4.25%.
Removed the PIK interest rate.
Removed the prepayment penalty.

16

Table of Contents

The end of term charge of $1,068,750 was partially extended with $534,375 paid on October 1, 2020 and $534,375 paid on February 1, 2021.

Effective September 30, 2020, the Company and Hercules entered into the Third Amendment to Loan and Security Agreement (“Third Amendment”) to provide for interest only payments commencing on October 1, 2020 and continuing through December 22, 2020 unless the Company raised net cash proceeds of at least $25 million through an equity or debt financing or other transaction on or before December 21, 2020. The Third Amendment also amended the minimum cash, minimum net revenue and minimum EBITDA financial covenants. On that same date, Juggernaut Capital Partners III, L.P, an affiliate of the JCP Investor., Hercules and Wells Fargo Bank, N.A. entered into an escrow agreement (the “Escrow Agreement”) to escrow funds amounting to approximately $1.5 million, an amount equal to the aggregate of certain principal payments due under the Loan Agreement, as amended. In connection with the consummation of the Mergers, the funds held in escrow were disbursed back to Juggernaut Capital Partners III, L.P. and the Escrow Agreement was terminated.

The Company satisfied the maturity date extension requirement pursuant to funds retained upon the closing of the Mergers in December 2020. As a result, the Senior Debt now has a maturity date of December 1, 2021. As of March 31, 2021, the Company was in compliance with its covenants.

Interest expense on the Senior Debt was as follows for the periods indicated:

For the Three Months Ended

March 31, 

    

2021

    

2020

Interest expense for term loan

$

160,912

$

387,566

Amortization of debt issuance costs

 

12,500

 

PIK interest

 

 

40,017

$

173,412

$

427,583

Included in accrued expenses in the accompanying condensed consolidated balance sheets as of March 31, 2021, and December 31, 2020 is $50,119 and $65,885, respectively, of accrued and unpaid interest.

Subordinated Related Party Term Loans

Subordinated Related Party Term Loans Entered into During 2020

During, 2020, the Company entered into Subordinated Promissory Notes with the JCP Investor in the principal amount of 15.5 million. The maturity date of the Subordinated Promissory Notes was April 2, 2021 and they had PIK interest that increases the outstanding principal on a daily basis at an annual rate of 20%.

In connection with the entry into the Merger Agreement on May 17, 2020, the JCP Investor, Neurotrope and Metuchen entered into a Note Conversion and Loan Repayment Agreement pursuant to which, the JCP Investor agreed to convert all of the above outstanding subordinated promissory notes and accrued PIK interest held by Juggernaut Capital Partners LLP and the JCP Investor, into Petros common stock in connection with the consummation of the Mergers on December 1, 2020, and the Subordinated Promissory Notes were terminated. Accordingly, the principal balance of the Subordinated Promissory Notes and accrued PIK interest was $0 as of both March 31, 2021, and December 31, 2020.

Interest expense on this debt was $76,282 comprised entirely of PIK interest, for the three months ended March 31, 2020.

17

Table of Contents

9)    Members’ Capital

(a)    Capitalization

Prior to September 16, 2019, the Company authorized 100 units of Class A Common Units (the “Class A Units”) to be issued and outstanding. In addition, there were Restricted Member Units (“RMU’s”) that were designated as a class of incentive units (also known as “Class B Units”).

On September 16, 2019, the Company amended and restated its operating agreement creating the rights and preferences relating to the Preferred Units and Common Units mentioned in the Private Placement Offering below. The issued and outstanding Preferred Units and Common Units were exchanged for Common Stock of the Company in connection with the Mergers.

(b)    Preferred Units

A holder of a Preferred Unit was entitled to vote on any matter requiring the approval of such units. In addition, the Preferred Unit holders were entitled to distributions, after adjustment for specific items, for each fiscal year.

The following actions required the prior consent of the holders of a majority of the outstanding Preferred Units: (a) amend, alter or repeal any provision of the amended and restated operating agreement (if such amendment would adversely affect any of the rights or preferences of the Preferred Units); (b) authorize or create membership interests that have a preference over the Preferred Units as to dividends or liquidation; (c) declare or pay any dividends or distributions; (d) dissolve or liquidate (in whole or in part), consolidate, merge, convey, lease, sell, or transfer all or substantially all of the assets of the Company; or purchase or otherwise acquire (directly or indirectly) all or substantially all of the assets or equity interest issued by another company; or file a petition for bankruptcy or receivership of the Company; (e) repurchase or redeem any Membership Interests; or (f) enter into any agreement, commitment or arrangement to do any of the foregoing. See also Note 12 Section (f) for further discussion of Preferred Units.

(c)    Common Units (formerly known as Class A Units)

A holder of a Common Unit was entitled to vote on any matter requiring the approval of such units. In addition, the Common Unit holders were entitled to distributions, after adjustment for specific items, for each fiscal year.

Effective with the amended and restated operating agreement on August 26, 2019, each Class A Unit was exchanged for 10,000 Common Units. There was no change to the ownership percentages as a result of the exchange and the rights and privileges of Common Unit holders is consistent with that of the Class A Unit.

(d)    Class B Units

As of September 16, 2019, none of the Class B Units had been issued. Effective with the amended and restated operating agreement on September 16, 2019, the Class B Units were no longer an authorized membership interest of the Company.

(e)    Liquidation

Upon liquidation of the Company or upon any Company sale, the Company was required to pay, hold, or distribute, or cause to be paid, held or distributed, the proceeds thereof as follows: (a) first, to the holders of Preferred Units, pro rata in proportion to the number of Preferred Units held by such holders, until the holders of such Preferred Units receive in respect of each Preferred Unit held by them, the preferred liquidation preference amount; (b) second, to the holders of Common Units, pro rata in proportion to the number of Common Units held by such holders, the remaining proceeds available for distribution.

18

Table of Contents

10)     Stockholders’ Equity

Upon consummation of the Mergers, each outstanding Common Unit or Preferred Unit of Metuchen was exchanged for a number of shares of Petros common stock, par value $0.0001 per share (the “Petros Common Stock”), equal to 0.4968, which resulted in an aggregate of 4,949,610 shares of Petros Common Stock issued to the holders of Metuchen units in the Mergers. In addition, each holder of Neurotrope common stock, par value $0.0001 per share (the “Neurotrope Common Stock”) received one (1) share of Petros Common Stock for every five (5) shares of Neurotrope Common Stock held, and each holder of Neurotrope preferred stock, par value $0.001 per share (the “Neurotrope Preferred Stock”) received one (1) share of Petros preferred stock (the “Petros Preferred Stock”) for every one (1) share of Neurotrope Preferred Stock held. In addition, each holder of outstanding options to purchase Neurotrope Common Stock or outstanding warrants to purchase Neurotrope Common Stock that were not previously exercised prior to the consummation of the Mergers was converted into equivalent options and warrants to purchase one (1) share of Petros Common Stock for every five (5) shares of Neurotrope Common Stock outstanding pursuant to such options or warrants.

As a result of the Mergers, the former Neurotrope shareholders collectively owned approximately 4,758,045 shares of Petros Common Stock and 500 shares of Petros Preferred Stock and the former Metuchen unit holders collectively owned 4,949,610 shares of Petros Common Stock. Accordingly, the former Metuchen unit holders collectively owned approximately 51% of Petros and the former Neurotrope shareholders collectively owned approximately 49% of Petros.

On January 26, 2021, 500 shares of the Company’s Preferred Stock were converted into 60,606 shares of the Company’s common stock.

Effective January 1, 2021, the Company entered into a Marketing and Consulting Agreement (the “Agreement”) with CorProminence, LLC (the “Consultant”) for certain shareholder information and relation services. The term of the Agreement is for one year with automatic consecutive one-year renewal terms. As consideration for the shareholder information and relation services, the Company will pay the Consultant a monthly retainer of $7,500 and issued 30,000 restricted shares of the Company’s common stock to the Consultant on March 24, 2021 (the “Grant Date”). The restricted shares vested immediately on the Grant Date.

Effective April 1, 2021, the Company entered into a Consulting and Advisory Agreement (the “Agreement”) with Tania King, an employee of Juggernaut Capital Partners LLP, for certain services. The term of the Agreement is indefinite but may be terminated by either party, with or without cause. As consideration for the consulting and advisory services, the Company will pay Ms. King a monthly fee of $4,000, an additional $12,000 payment included with the first monthly fee for services provided since January 1, 2021, and issue restricted stock units for shares of the Company’s common stock (“RSU’s”) with a cash value of $72,000 as of the date of the grant (the “Grant Date”). The RSU’s shall vest and settle in full on the one-year anniversary of the grant date.

Backstop Agreement

In connection with the entry into the Merger Agreement, Neurotrope and an affiliated entity of the JCP Investor entered into a Backstop Agreement pursuant to which Juggernaut agreed to contribute to Metuchen at the closing of the Mergers an amount equal to the Working Capital Shortfall Amount (as defined in the Merger Agreement), if any, as determined in accordance with the Merger Agreement, up to an aggregate amount not to exceed $6,000,000 (the “Commitment Cap”). Following the closing of the Mergers and until the one-year anniversary of the closing of the Mergers (the “Anniversary Date”), Juggernaut agreed to contribute, or cause an affiliate to contribute, to Petros an amount equal to the Commitment Cap less the Working Capital Shortfall Amount (the “Post-Closing Commitment”) on the Anniversary Date; provided, however, that, (a) in the event that, at any time between the closing of the Mergers and the Anniversary Date, the closing price per share of Petros’s Common Stock on The Nasdaq Capital Market or any other securities exchanges on which the Petros Common Stock is then traded equals or exceeds $2.175 for a period of ten consecutive trading days, then the Post-Closing Commitment shall be reduced by fifty percent (50%) and (b) in the event that, at any time between the closing of the Mergers and the Anniversary Date, the closing price per share of Petros’s Common Stock on The Nasdaq Capital Market or any other securities exchanges on which the Petros Common Stock is then traded equals or exceeds $2.5375 for a period of ten (10) consecutive trading days, then the Post-Closing Commitment shall be $0.

19

Table of Contents

Pursuant to the Backstop Agreement and upon closing of the Mergers, Juggernaut paid the Company $2.6 million for the Working Capital Shortfall Amount, which was recorded in equity in relation to the net proceeds received from the reverse capitalization.

Contingent Consideration

Pursuant to the Merger Agreement, each security holder of Metuchen received a right to receive such security holder’s pro rata stock of an aggregate of 14,232,090 stocks of Petros Common Stock potentially issuable upon the achievement of certain milestones set forth in the Merger Agreement. The milestones are for the achievement of stock price and market capitalization, as defined over a two-year period.

Milestone Earnout Payments

In connection with the Mergers, each security holder of Metuchen received an equity classified earnout consideration to be paid in the form of Petros Common Stock if the Closing Price (as defined in the Merger Agreement) per share of stock of Petros’ Common Stock equals or exceeds certain milestones set forth in the Merger Agreement, as discussed below. Each milestone earnout payment is only achievable and payable one time and upon attainment of such milestone earnout payment. In no event will the sum of the milestone earnout payments be greater than 4,000,000 shares of Petros Common Stock. As of March 31, 2021, the milestones have not been achieved.

If at any time following the Closing (as defined in the Merger Agreement) and prior to the one-year anniversary of the Closing, the Closing Price per share of Petros Common Stock is, for a period of twenty (20) trading days during any thirty (30) consecutive trading day period, greater than or equal to:

$8.00 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.
$10.00 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.
$13.00 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.
$15.00 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.

If at any time within the twelve (12) month period following the one-year anniversary of the Closing, the Closing Price per share of Petros Common Stock is, for a period of twenty (20) trading days during any thirty (30) consecutive trading day period, greater than or equal to:

$10.00 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.
$12.50 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.
$16.25 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.
$18.75 - then the earnout payment will be equal to 1,000,000 shares of Petros Common Stock.

20

Table of Contents

Market Capitalization/Gross Proceeds Earnout Payments

In connection with the Mergers, each security holder of Metuchen received the right to receive earnout consideration, which is liability classified, to be paid in the form of Petros Common Stock if either Petros’ Market Capitalization (as defined in the Merger Agreement) or Petros receives aggregate gross proceeds that equals or exceeds certain milestones set forth in the Merger Agreement, as discussed below. Each milestone earnout payment is only achievable and payable one time and upon attainment of such milestone. In no event will the sum of the milestone earnout payments be greater than 10,232,090 shares of Petros Common Stock. As of March 31, 2021, the milestones have not been achieved. The fair value of the derivative liability was $4.5 million and $9.9 million as of March 31, 2021 and December 31, 2020, respectively.

Metuchen equity holders will have the opportunity to receive the following during the period ending on the second anniversary of the Closing:

a.The Earnout Payment shall be equal to 2,000,000 shares of Petros Common Stock if:
i.Petros’ Market Capitalization (as defined in the Merger Agreement) is greater than or equal to $250,000,000 for a period of twenty (20) trading days during any thirty (30) consecutive trading day period with a Closing Price of no less than $17.50 on each such trading day; or
ii.Petros receives aggregate gross proceeds of at least $25,000,000 in an offering (or series of offerings within a sixty (60) calendar day period) of Petros Common Stock with a price per share of Petros Common Stock sold equal to no less than $17.50 in each offering (or series of offerings) and where Petros has a Market Capitalization immediately prior to each such offering (or series of offerings) equal to at least $250,000,000.
b.The Earnout Payment shall be equal to 2,000,000 shares of Petros Common Stock if:
i.Petros’ Market Capitalization is greater than or equal to $300,000,000 for a period of twenty (20) trading days during any thirty (30) consecutive trading day period with a Closing Price of no less than $18.75 on each such trading day; or
ii.Petros receives aggregate gross proceeds of at least $30,000,000 in an offering (or series of offerings within a sixty (60) calendar day period) of Petros Common Stock with a price per share of Petros Common Stock sold equal to no less than $18.75 in each offering (or series of offerings) and where Petros has a Market Capitalization immediately prior to each such offering (or series of offerings) equal to at least $300,000,000.
c.The Earnout Payment shall be equal to 3,000,000 shares of Petros Common Stock if:
i.Petros’ Market Capitalization is greater than or equal to $400,000,000 for a period of twenty (20) trading days during any thirty (30) consecutive trading day period with a Closing Price of no less than $22.50 on each such trading day; or
ii.Petros receives aggregate gross proceeds of at least $40,000,000 in an offering (or series of offerings within a sixty (60) calendar day period) of Petros Common Stock with a price per share of Petros Common Stock sold equal to no less than $22.50 in each offering (or series of offerings) and where Petros has a Market Capitalization immediately prior to each such offering (or series of offerings) equal to at least $400,000,000.
d.The Earnout Payment shall be equal to 3,232,090 shares of Petros Common Stock if:
i.Petros’ Market Capitalization is greater than or equal to $500,000,000 for a period of twenty (20) trading days during any thirty (30) consecutive trading day period with a Closing Price of no less than $23.75 on each such trading day; or

21

Table of Contents

ii.Petros receives aggregate gross proceeds of at least $50,000,000 in an offering (or series of offerings within a sixty (60) calendar day period) of Petros Common Stock with a price per share of Petros Common Stock sold equal to no less than $23.75 in each offering (or series of offerings) and where Petros has a Market Capitalization immediately prior to each such offering (or series of offerings) equal to at least $500,000,000.

11)    Stock Options

The Company established the 2020 Omnibus Incentive Compensation plan (the “2020 Plan”) which provides for the grants of awards to our directors, officers, employees, and consultants. The 2020 Plan authorizes the grant of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units and other stock-based awards and cash-based awards. As of March 31, 2021 there were 1,078,346 shares authorized, and 288,346 shares available for issuance, under the 2020 Plan.

Upon the consummation of the Mergers as disclosed in Note 1, Neurotrope options issued and outstanding as of December 1, 2020 were converted into equivalent options to purchase stocks of Petros common stock and were adjusted to give effect to the Exchange Ratio set forth in the Merger Agreement. The following is a summary of stock options for the three months ended March 31, 2021:

    

    

Weighted-Average 

    

Weighted-

Remaining 

Aggregate Intrinsic 

Number of 

Average 

Contractual 

Value 

    

Shares

    

Exercise Price

    

Term (Years)

    

($ in thousands)

Options outstanding and exercisable at December 31, 2020

 

574,331

$

51.43

 

0.9

$

Options granted

 

215,669

 

3.74

 

9.9

 

Less: options forfeited

 

 

 

 

Less: options expired/cancelled

 

 

 

 

Less: options exercised

 

 

 

 

Options outstanding at March 31, 2021

 

790,000

 

38.41

 

3.3

 

Options exercisable at March 31, 2021

 

682,166

 

43.89

 

2.3

 

Upon the consummation of the Mergers as disclosed in Note 1, the vesting of former Neurotrope stock options in accordance with their terms was accelerated due to a change in control pursuant to the terms of the Neurotrope, Inc. 2013 Equity Incentive Plan and the Neurotrope, Inc. 2017 Equity Incentive Plan. Pursuant to the change in control, Neurotrope extended the period to exercise the stock options to be one-year from the closing of the Mergers. Accordingly, the Company did not record any stock-based compensation expense in connection with these stock options during the period from December 1, 2020 through December 31, 2020.

On February 19, 2021, Fady Boctor, the President and Chief Commercial Officer of the Company, was granted an option to purchase 215,669 shares of the Company’s common stock at an exercise price of $3.74 per share. The option vested 50% as of February 19, 2021, the date of grant, and the remainder shall vest in equal installments on the first and second anniversary thereof.

On April 8, 2021, in connection with the Directors’ appointment to the Board upon the Company becoming an independent publicly traded company on December 1, 2020, the Company awarded each of the five Directors an initial grant of options (the “Initial Grant”) to purchase 50,000 shares of common stock of the Company at an exercise price of $3.18 per share. The shares of common stock underlying the options vested 25% on the date of grant, 25% shall vest upon the six-month anniversary of the date of grant and the remainder shall vest in equal installments over the following four fiscal quarters. On April 23, 2021, Tania King, a JCP Investor affiliate, pursuant to her contract, received $72,000 of RSUs when the closing stock price was $3.09 per share, or 23,301 RUSs granted with cliff vesting of 100% in one year. In addition, additional RSUs, valued at $296,000, were granted to five directors on April 8, 2021 when the closing price was $3.18 per share, resulting in 93,082 RSUs issued. As of April 23, 2021, the 2020 Plan is short of shares to cover all the board grants and options by 78,037 shares.

22

Table of Contents

12)    Common Stock Warrants

Upon the consummation of the Merger as disclosed in Note 1, Neurotrope warrants issued and outstanding as of December 1, 2020 were converted into equivalent warrants to purchase common stock of Petros and were adjusted to give effect to the Exchange Ratio set forth in the Merger Agreement. The following is a summary of warrants for the three months ended March 31, 2021:

    

Number of Shares

Warrants outstanding at December 31, 2020

 

4,407,962

Warrants issued

 

Warrants exercised

 

Warrants outstanding at March 31, 2021

 

4,407,962

As of March 31, 2021, the Company’s warrants by expiration date were as follows:

Number of Warrants

    

Exercise Price

    

Expiration Date

76,569

$

32.00

November 17, 2021

131,344

 

64.00

November 17, 2021

2,780

 

1.60

August 23, 2023

18,000

 

35.65

June 1, 2024

4,800

 

35.60

June 5, 2024

74,864

 

21.85

June 17, 2024

20,043

 

31.25

June 19, 2024

22,800

 

26.55

September 1, 2024

10,500

 

12.7382

September 16, 2024

22,800

 

4.30

December 1, 2024

28,000

 

5.65

March 2, 2025

28,000

 

7.30

June 1, 2025

28,000

 

5.50

September 1, 2025

28,000

 

4.71

December 1, 2025

2,221,829

 

7.50

December 1, 2025

908,498

 

17.50

December 1, 2025

623,303

 

51.25

December 1, 2025

157,832

 

125.00

December 1, 2025

4,407,962

 

  

  

13)    Basic and Diluted Net Loss per Common Share

Upon the consummation of the Mergers on December 1, 2020, the basic weighted average number of common shares outstanding for the three months ended March 31, 2020 has been calculated using the number of common units outstanding of Metuchen from January 1, 2020 through the March 31, 2020 multiplied by the exchange ratio used in the transaction.

23

Table of Contents

The following is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net loss per share:

For the Three Months Ended

March 31, 

    

2021

    

2020

Numerator

 

  

 

  

Net income (loss)

$

3,009,081

$

(6,083,219)

Denominator

 

  

 

  

Weighted-average common shares for basic net income (loss) per share

 

9,753,086

 

4,949,610

Effect of common share equivalents within common stock warrants

 

1,600

 

Weighted-average common shares for basic net income (loss) per share

 

9,754,686

 

4,949,610

Basic and diluted net income (loss) per common share

$

0.31

$

(1.23)

The following table summarizes the potentially dilutive securities convertible into common shares that were excluded from the calculation of diluted net loss per share because their inclusion would have been antidilutive:

For the Three Months Ended

March 31, 

    

2021

2020

Stock Options

 

790,000

 

Warrants

 

4,405,182

 

127,396

Total

 

5,195,182

 

127,396

14)   Marketing, Licensing and Distribution Agreements

(a)    Vivus

On September 30, 2016, the Company entered into a License and Commercialization Agreement (the “License Agreement”) with Vivus, Inc, (“Vivus”) to purchase and receive the license for the commercialization and exploitation of Stendra® for a one-time fee of $70 million, and for an additional $0.8 million, the Company also acquired the current Stendra® product and sample inventories as of September 30, 2016 that were owned by Vivus. The License Agreement gives the Company the right to sell Stendra® in the U.S and its territories, Canada, South America, and India. In December 2000, Vivus originally was granted the license from Mitsubishi Tanabe Pharma Corporation (“MTPC”) to develop, market, and manufacture Stendra®. Stendra® was approved by the Food and Drug Administration (“FDA”) in April 2012 to treat male erectile dysfunction.

The Company will pay MTPC a royalty of 5% on the first $500 million of net sales and 6% of net sales thereafter. In consideration for the trademark assignment and the use of the trademarks associated with the product and the Vivus technology, the Company shall (a) during the first, second, and third years following the expiration of the Royalty Period in a particular country in the Company’s territory, pay to Vivus a royalty equal to 2% of the net sales of products in such territory; and (b) following the fourth and fifth years following the end of the Royalty Period in such territory, pay to Vivus a royalty equal to 1% of the net sales of products in such territory. Thereafter, no further royalties shall be owed with respect to net sales of Stendra® in such territory.

In addition, the Company will be responsible for a pro-rata portion of a $6 million milestone payment to be paid once $250 million in sales has been reached on the separate revenue stream of Stendra®. Should the $250 million of sales threshold be reached, the Company will be responsible for $3.2 million of the milestone payment.

24

Table of Contents

In connection with the License Agreement, the Company and Vivus also entered into a Supply Agreement on the effective date of the License Agreement. The Supply Agreement states that Vivus will initially manufacture, test, and supply the product to the Company or its designee, directly or through one or more third parties. The agreement is effective through December 31, 2021. On July 7, 2020, Vivus announced that it has completed the solicitation of an in-court prepackaged plan of reorganization, under which IEH Biopharma LLC will take 100% ownership of Vivus. The Company provided Vivus with notice of termination of the supply agreement on September 30, 2019, effective on September 30. 2021. The Company is required to make future minimum annual purchases of Stendra® under the Supply Agreement as follows (based on current prices, however, subject to annual price increases). As of March 31, 2021, the minimum purchase obligation is estimated to be $4.1 million in 2021.

Stendra® can be purchased by written purchase orders submitted to Vivus at least 125 days in advance of the desired shipment date. For each quarter, the Company is required to submit purchase orders for at least 90% of the quantities in the forecast above. Vivus will have no obligation to supply Stendra® in excess of 120% of the quantity specified above but will use reasonable efforts.

As of both March 31, 2021, and December 31, 2020, the Company has $14.2 million of accrued inventory purchases related to the Company’s minimum purchase obligations with Vivus for raw material or API inventory. As API inventory is not a finished good, the Company does not have title to the product and classifies API Inventory in either other current assets or other assets, depending on whether the Company expects to take title to the product within one year from the date of the financial statements. As of both March 31, 2021, and December 31, 2020, there was $1.3 million included in other current assets (see Note 5 Prepaid and Other Current Assets). As of both March 31, 2021, and December 31, 2020, $11.1 million included in other assets on the accompanying condensed consolidated balance sheets. The Company reviews its inventory levels and purchase commitments for excess amounts that it is required to purchase but projects it will not be able to sell prior to product expiry. During the three months ended March 31, 2021 and 2020, the Company has not recorded any additional reserve to reduce the cost of API inventory.

During the three months ended March 31, 2021 and 2020, the Company incurred royalties to MTPC for Stendra of $160,032 and $39,913, respectively. Royalties incurred were included in cost of goods sold in the condensed consolidated statements of operations. As of March 31, 2021 and December 31, 2020, the Company had a payable for royalties of $168,760 and $8,728, respectively, which is included in accrued expenses in the accompanying condensed consolidated balance sheets. Royalties incurred were included in cost of goods sold in the condensed consolidated statements of operations.

The license agreement between MTPC and Vivus (“MTPC License”) contains certain termination rights that would allow MTPC to terminate the agreement if Vivus were to breach any of the terms of the MTPC License or become insolvent or bankrupt. In the event that MTPC terminates the MTPC License with Vivus because of any contractual breach the Company has step-in rights with MTPC, which would allow the Company to continue to sell Stendra®.

(b)    Hybrid

In March 2020, the Company acquired the exclusive license to H100™ from Hybrid. H100™ is a topical candidate with at least one active ingredient and potentially a combination of ingredients responsible for the improvement of penile curvature during the acute phase of Peyronie’s disease. We paid an initial license fee of $100,000, with an additional $900,000 payment due upon obtainment of orphan indication for H100™ and termination of Hybrid’s existing agreement with a compounding pharmacy, and additional annual payments of $125,000, $150,000 and $200,000 due on each of the first, second and third anniversaries of the license agreement and $250,000 annual payments due thereafter. The Company is also required to make a $1,000,000 payment upon first commercial sale and a sliding scale of percentage payments on net sales in the low single digits. Annual anniversary payments will not be required after commercialization. The Company is also obligated to make royalty payments between 3-6% of any net sales. In addition, the Company may terminate at any time after first anniversary, without cause, upon ninety (90) days’ notice.

25

Table of Contents

The initial license fee of $100,000 and an extension payment of $100,000 has been recorded in research and development during the year ended December 31, 2020. The Company has treated the acquisition as an asset acquisition and has concluded that the asset acquired and the upfront payment should be expensed as it was considered an IPR&D asset with no alternative future uses.

On September 24, 2020, the Company and Hybrid entered into a letter agreement, pursuant to which the term of the license agreement was extended for an additional six months to March 24, 2021. In consideration for the extension, the Company paid Hybrid $50,000 in October 2020 and an additional $100,000 in December 2020. On March 31, 2021, the Company and Hybrid, entered into a second letter agreement, pursuant to which the parties agreed to extend the Second Period (as defined in the License Agreement) for an additional six (6) months to September 24, 2021. Additionally, the Company agreed to pay Hybrid a one-time, non-creditable and non-refundable payment of $200,000, which was payable within seven calendar days of entering into the agreement.

15)  Commitments and Contingencies

(a)    Employment Agreements

The Company has employment agreements with certain executive officers and key employees that provide for, among other things, salary and performance bonuses.

In connection with entry into the Merger Agreement Amendment, Neurotrope, Neurotrope Bioscience, Inc. (a wholly-owned subsidiary of Neurotrope) and Metuchen entered into an Employee Lease Agreement pursuant to which Neurotrope and Neurotrope Bioscience, Inc. agreed to lease the services of Dr. Charles Ryan to Metuchen prior to the Closing. Dr. Ryan was required to devote no more than 75% of his working time performing services to Metuchen under the Employee Lease Agreement and Metuchen paid 75% of the costs associated with Dr. Ryan’s employment from the period beginning on June 1, 2020 through the Closing, including but not limited to, the costs for all compensation and benefits paid to, for or on behalf of Dr. Ryan (the “Fees”). Upon consummation of the Mergers, Metuchen paid approximately $0.2 million for the Fees pursuant to the Employee Lease Agreement, which reduced the amount of cash that Petros retained following the Closing.

In connection with the consummation of the Mergers, on December 24, 2020, the Company and Mr. Keith Lavan entered into a Separation Agreement (the “Separation Agreement”), pursuant to which Mr. Lavan resigned as Senior Vice President and Chief Financial Officer of the Company and agreed to serve as an advisor to the Company through December 31, 2020 (the “Separation Date”). Pursuant to the Separation Agreement, in addition to other benefits, Mr. Lavan received a stay-on bonus of $50,000 for continuing to remain employed by the Company through the Separation Date. For his services as an advisor, the Company agreed to pay Mr. Lavan an amount equal to 50% of his base salary as of immediately prior to the Separation Date. The Company paid 70% of such amount on January 15, 2021 and 30% of such amount in equal installments from the Separation Date through June 30, 2021. In addition, Mr. Lavan executed a general release of liabilities in favor of the Company.

(b)    Legal Proceedings

On July 14, 2020, Greg Ford, the Chief Executive Officer of the Company, was terminated. On July 14, 2020, Mr. Ford, through his attorney, claimed that he was entitled to severance pay pursuant to an employment agreement following the termination of his employment on that same date. This claim is currently at an early stage where the Company is unable to determine the likelihood of any unfavorable outcome.

The Company is not currently involved in any other significant claims or legal actions that, in the opinion of management, will have a material adverse impact on the Company’s operations, financial position or cash flows.

(c)    Operating Leases

The Company has commitments under operating leases for office and warehouse space used in its operations. The Company’s leases have remaining lease terms ranging from 3.4 years to 5.8 years.

26

Table of Contents

The components of lease expense were as follows:

For the Three Months Ended

March 31, 

    

2021

    

2020

Operating Lease Cost:

 

  

 

  

Fixed lease cost

$

44,812

$

44,812

Supplemental balance sheet information related to leases was as follows:

    

As of March 31, 2021

    

As of December 31, 2020

Operating lease ROU asset:

 

  

 

  

Other assets

$

554,379

$

579,535

Operating lease liability:

 

  

 

  

Other current liabilities

$

113,052

$

108,971

Other long-term liabilities

 

500,512

 

530,597

Total operating lease liability

$

613,564

$

639,568

Supplemental lease term and discount rate information related to leases was as follows: